At least, though, this is one editorial plan I have not, like many others lately, had to rip up. I am also going to stick to my plan to use this column to repeat our concerns over the wave of Covid-19 prompted fundraisings from which retail investors are being disgracefully excluded. My colleague Emma Powell wrote about this effective abandonment of pre-emption principles in the last issue, but this week has brought several more such placings and it seems extremely likely that companies will continue to return to their investors in the months ahead – on current form, only their institutional investors.
In short, something needs to be done very quickly to ensure that retail investors do not suffer more unfair and avoidable dilution because of the FCA’s endorsement of doubling the amount that companies can raise without recourse to existing holders to 20 per cent of their share capital. Sure, these are difficult times in which many companies are fighting for their survival. But so are the retail shareholders that the watchdog exists to protect, and sanctioning a move that inflicts further losses on them hardly seems in keeping with its mandate. With £3bn raised so far, private investors are taking a bit hit.
In fact, I increasingly wonder why there was any need to change the rules at all – unless company boards had no rainy-day plans or had foolishly stretched credit lines to breaking point, a 10 per cent placing within the old system must surely have been enough to fend off any imminent financial danger; a subsequent issue via an offer or rights issue that included retail shareholders could surely have been organised by the time further funding was required. And, as Emma explored, if accelerated fundraisings are truly needed, then technology means involving retail shareholders is easily possible, as the new platform Primary Bid is arguing.
I spoke to one of its bosses this week, who has long advocated the view that companies “ignore retail at their peril” – because they are an engaged and often loyal group of shareholders that support the price discovery mechanism that markets need. And yet that is what the FCA, the body charged with their protection, has done, stemming from the prejudice that private investors somehow need protecting more from themselves than the industry servicing them. That notion seems at odds with the reality that some of the costliest mistakes suffered by retail investors have been made by professionals – the retreating tide of the oil market is likely to reveal many more of the latter who are the ones in fact swimming naked.